In the past several years the growth of virtual property in today’s economy has been explosive. The everyday use of virtual assets ranging from Twitter and Facebook to YouTube and virtual world accounts is nearly absolute. Indeed, by one account Americans check social media over 17 times per day. Further, a growing number of savvy virtual entrepreneurs are reporting incomes in the six and seven figure range, derived solely from their online businesses. Nevertheless, although the commercial world has come to embrace these newfound markets, commercial law has done a poor job of keeping up. Scholars have argued that laws governing everything from taxation, to bankruptcy, to privacy rights have not kept pace with our ever-changing virtual world. And nowhere is this truer than in the law of secured credit. Doubtlessly virtual property has come to represent significant wealth and importance, yet its value as a source of leveraged capital remains, in large part, untapped. This unrealized potential is not without good reason; the law — specifically Article 9 of the UCC and the law of property more broadly — suffers from a number of deficiencies and anomalies that make the use of virtual property in secured credit transactions not only overly complex and expensive, but almost entirely untenable. This Article shines light on these shortcomings, and, in doing so, advances a number of guiding principles and specific legislative recommendations, all geared toward a reformation of the law of secured credit in virtual property.

If you are looking for an interesting ripped-from-the-headlines hypo to spark discussion when you are discussing intellectual property, here's another Disney example. Randy Moore, a guerilla filmmaker shot a movie largely on Disney property, using oodles of Disney IP, without the permission of Disney or any of the park guests that appear in the film. The film was shown at Sundance and has now secured a distribution deal. Disney has apparently made no public statement, but hasn't taken legal action either.

Here's a CNN story which has clips from the movie, and a couple of news articles here and here.

If you've never seen the brilliant remix of Buffy, the Vampire Slayer and Twilight, which recasts the brooding romantic vampire Edward as a creepy stalker, and provides some pretty on-point commentary on the current teen paranormal romance genre, check it out here.

Even though the remix, which was first uploaded to YouTube three and a half years ago has received 3 million views on that site, it has been removed. The creator, Jonathan McIntosh, recounts the exhausting and frustrating story on his website. The upshot -- even though the remix was actually cited by the US Copyright Office as an example of transformative noncommercial video work -- YouTube will only respect fair use arguments if the copyright holder acknowledges them.

Jonathan acknowledges the valuable advice of New Media Rights, which is affiliated with California Western School of Law. Check out their work here.

Honda has a new Super Bowl commercial for the CR-V, and has posted an extended version on the Internet. Starring Matthew Broderick, it uses multiple lines from "Ferris Bueller's Day Off" and basically tracks the movie in recreated/adapted scenes. (They didn't get Ben Stein, though.) As a Gen-Xer, how could I not love this commercial? It may also be a good prompt for classroom discussions of copyright. Did Honda get permission of whoever owns the rights to Ferris? Did they need to?

Legendary New York rock band, The Velvet Underground, has sued the foundation that manages artist Andy Warhol’s legacy. The band claims that the foundation has violated its trademark by licensing the banana image that appeared on the cover of its 1967 album to third parties, including cases for iPhones.

“The banana design became a symbol, truly an icon, of the Velvet Underground,” charged the suit filed Wednesday in Manhattan Federal Court.

The Velvets acknowledge that Warhol designed the cover and claim that he split a $3,000 advance with the band members as payment for his work.

A property right (ius in rem, real right) is an abstract legal concept which relates to an object, referred to as “thing” or “res,” or imprecisely, but commonly, “property.” This object of property is a product of legal categorisation; it may be represented by a physical thing or it can be an abstract legal creation itself, as is the case with an intellectual property right. In any event, for the law the “property-object” (whether tangible, intangible or purely intangible) is the product of a legal conceptualisation. The law (private law) creates any res or thing, whether corporeal or not, through the legal concept of real rights. That enables legal recognition of the res in question. The material object (if there is one) only becomes a res in law if real rights are attached to it. Therefore, real rights and res are both “property”, and particularly with (purely intangible) intellectual property, property rights and property objects merge into one. The abstract conceptual res typically has a reifier to make it recognisable in the material world and for the purpose of social interactions. This reifier can be a corporeal object, in which case it is a direct reifier (a table being a direct reifier and incident of a res, chattel), but, for example in case of copyright, a chattel may act not only as direct reifier of the notional personal (moveable) property right (e.g. a canvas of a painting, the score of a symphony, the paper of a manuscript), but also as an indirect reifier of the notional copyright (artistic work, musical work, literary work). The chattel in question represents directly the personal/moveable property (but does not constitute it, because the res remains a legal concept), and, in addition, the chattel represents indirectly the copyright in the work which is expressed and recorded in the chattel in question (a painting, sculpture etc.).

One should regard the Principles of Equity by Lord Kames (1696-1782) as a work of applied legal philosophy rather than black-letter law. It is secondary whether the law was exactly as stated in the Principles of Equity, especially as that would have been the legal situation 250 years ago anyway. What is relevant is that the book contains a logically organised and principled jurisprudential discussion of scenarios of conflicts and proposed solutions by the law of equity. One should be able to detect and develop a set of legal solution mechanisms, abstract paradigms of concrete legal rules which may serve as an inspiring force for real life solutions without slavish adherence to the model. The Principles of Equity fill the gap between the philosopher who is often creative but not meticulous, and the lawyer who is often meticulous but exegetic. Where the lawyer has to be meticulous and creative and needs the approach of an applied philosopher as well as a legal specialist, particularly in the role as a legal theorist or as a draftsperson of statutes and contracts, he or she will find an excellent teacher in Kames. His work shows that law is not rote learning of statutes and cases and their mechanical application, but a craft as a basis for the art of justice, a craft that should be rooted more in reason than in authority.

Ben Barros

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In 2009, New York opened High Line Park to rave reviews. The city (and its allied private foundations) converted an unused stretch of elevated train tracks into a greenspace. By all accounts the High Line as been a smashing success; it's spurred new investment throughout the old Meatpacking District.

In fact, the park has been so successful that now other cities such as Chicago, Philadelphia, Detroit, and St. Louis, are working to transform elevated train trestles into public spaces.

New Yorkers shoud be furious. These copycats are pulling a fast one the taxpaying citizens of the Big Apple. Afterall, New York took a big risk putting up the High Line. The 1-mile section cost over $150 million to renovate and, at the time, nobody had any idea if it would pay off. If the park had bombed, New York would have had to pay the costs all on its own. And now that the idea is successful the city cannot fully internalize the costs benefits of its risk-taking. That's bad.

The solution, I think, is to grant cities intellectual property in their innovations. Just as patents promote risky but ultimately valuable scientific experimentation, granting some form of IP protection to cities and states could result in a socially beneficial upsurge in municipal experiments.

It's easy to complain that our local governments don't do enough and that politicians lack the courage to enact bold new ideas, but in practice they have very few incentives to try genuinely new things. It's much easier to sit back and copy the ideas of others (I'm looking at you Chicago). Some form of intellectual property rights could fix that. Think this idea is too far out? Well, someone has already written an Article explaining why I'm right.

At the start of the Industrial Revolution, patentees created many novel and complex transactions to commercialize their property: they maximized their profits through sophisticated agreements that imposed restrictions on manufacturing, sales, and other uses of their inventions. When these restrictions were challenged as invalid restraints on property, courts consistently upheld them. They did so by employing the same concepts and doctrines used by common law courts to validate the creation of lesser estates or restrictive covenants for real property. In sum, early American courts incorporated into patent law the same legal doctrines governing conveyances of real estate, even going so far as adopting the common law property concepts of "assignments" and "licenses." Given widespread confusion today concerning patent conveyance doctrines, this chapter explains the structure and content of this now-forgotten doctrinal framework.

This analysis is descriptive (or positive, in economic parlance), but patent theorists today can draw at least two important lessons from it. First, it reveals how traditional property theory is determinative in patent law. Early American courts secured to patentees the same conveyance rights as owners of real estate because patents were "property." Thus, by definition, patentees enjoyed the same rights as those of landowners – the exclusive rights of use, enjoyment and disposal. Courts applied to patentees the same legal rules for conveying estates, and thereby permitted patent-owners to sue downstream infringers if there was a properly created reversionary interest. Second, patents are now defined as securing only a right to exclude, and this has unhinged patent conveyance doctrines from their firm conceptual grounding in property law. When novel issues are presented to courts concerning complex conveyances of patent rights, the result is indeterminacy and confusion in both the Federal Circuit's and the Supreme Court's decisions. Perhaps it is time to rethink how the hoary concept of property was essential to the successful commercialization of property rights in inventions in the nineteenth century.

Mike Tyson is famous for a lot of things: his boxing, his pigeon racing, his taste for human flesh. In the tattoo world, however, he's best known for his truly awesome face tattoo.

In a strange turn of events, the artist that inked Tyson's face is suing Warner Brothers to stop the distribution of The Hangover II. A character in that movie wakes up in Bangkok (after a long night of drinking) and finds his face mysteriously covered with a tattoo that looks very similar to Tyson's (If I had a nickel...). The artist, S. Victor Whitmill, claims that Warner Bros. has illegally reappropriated his work and infringed on his copyright.

Whitmill might have a good case; He has a signed release from Tyson granting him ownership of the work, and the tattoo has a very prominent place in both the movie and the promotional materials. Moreover, there's both scholarship (Christopher A. Harkins,Tattoos and Copyright Infringement: Celebrities, Marketers, and Business Beware of the Ink, 10 Lewis & Clark L. Rev. 313 (2006)) and caselaw (Gonzales v. Kid Zone, Ltd. and Transfer Technologies, Inc.) that suggests tattoos are fully copyrightable.

A couple of points here. First, Whitmill's suit seems to violate a pretty strong social norm in the tattoo world. As Pat Fish, a Santa Barbara artist notes, "Attempting to bring lawyers in always makes things worse. They are Harpies, they shit on everything they feed on. No one in their right mind would ever try to bring lawers into the tattoo world . . ."

Second, if you extend the reasoning here, could Whitmill keep Tyson from appearing in movies? How does the tattoo copyright interact with Tyson's right of publicity? Does Tyson have some kind of implied license to, ugh... use his face.

Commentators have poured forth a loud and sustained outcry over the past few years that sees property rule treatment of intellectual property (IP) as a cause of excessive transaction costs, thickets, anticommons, hold-ups, hold-outs, and trolls, which unduly tax and retard innovation, competition, and economic growth. The popular response has been to seek a legislative shift towards some limited use of weaker, liability rule treatment, usually portrayed as “just enough” to facilitate transactions in those special cases where the bargaining problems are at their worst and where escape hatches are most needed. This essay is designed to make two contributions. First, it shows how a set of changes in case law over just the past few years have hugely re-shaped the patent system from having several major, and helpful, liability-rule-pressure-release-valves, into a system that is fast becoming almost devoid of significant property rule characteristics, at least for those small entities that would most need property rule protection. The essay then explores some harmful effects of this shift, focusing on the ways liability rule treatment can seriously impede the beneficial deal-making mechanisms that facilitate innovation and competition. The basic intuition behind this bad effect of liability rules is that they seriously frustrate the ability for a market-challenging patentee to attract and hold the constructive attention of a potential contracting party (especially one that is a larger more established party) while preserving the option to terminate the negotiations in favor of striking a deal with a different party. At the same time, liability rules can have an additional bad effect of helping existing competitors to coordinate with each other over ways to keep out new entrants. The essay is designed to contribute to the literature on IP in particular, as well as the broader literatures on property and coordination, by first showing how a seemingly disconnected set of changes to the legal rules impacting a particular legal regime like the patent system can have unintended and sweeping harmful consequences, and then by exploring why within the more middle range of the spectrum between the two poles of property rules and liability rules, a general shift towards the property side may be preferred by those seeking an increase in access and competition.

This essay explains how a 2006 court decision arising from the manufacture of the F-22 Raptor fighter jet paves the way for government-owned General Motors to steal intellectual property. In Zoltek v. U.S., the Court of Appeals for the Federal Circuit held that a loophole in the Tucker Act (28 U.S.C. § 1498) prevented owners of patented processes from suing the federal government for certain types of unauthorized uses of their patents. The Zoltek court also held that patents are not secured as constitutional "private property" under the Takings Clause of the Fifth Amendment. At the time, many judges and lawyers thought that these statutory and constitutional loopholes for patent-owners were insignificant; at worst, they argued, this benefits only military contractors and the like.

Fast forward four years and the federal government now owns the "new GM." It was inconceivable in 2006 that Uncle Sam soon would be in the business of making cars, not to mention in the businesses of banking and insurance, setting salaries of CEOs, purchasing mortgages, etc., etc. This dramatic turn of events means that court decisions that once seemed exceedingly narrow have acquired new breadth and scope. This essay thus explores how Zoltek justifies extensive infringement of U.S. patents by GM and other firms now working for the federal government. Although it is arguable that denying patent-owners their constitutional rights is insignificant in any situation, the events since 2006 at least suggest that many people spoke too soon when they claimed that Zoltek was of little import or concern.

Ben Barros

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Alina Ng (Mississippi College School of Law) has posted Property and Progress on SSRN. Here's the abstract:

Copyright laws aim to protect intangible interests in the use of literary and artistic works to provide creators with an incentive to produce. The law rationalizes that by granting exclusive “property” rights in creative works, authors will be encouraged to produce works for the ultimate benefit of society as the potential for commercial rewards is assumed to be the primary motivation for creativity. But, the exclusive control these rights give creators and owners of copyrighted works have been the subject of severe criticism because they create access barriers to the use of content, which, free speech and civil liberties advocates, argue should be free of restrictions for civil discourse and political dialogue. This Article argues that, contrary to contemporary thought that rights in the copyright system hampers progress, the protection of individual rights in literary and artistic works - besides encouraging creativity for progress - also brings into the copyright system a normative order for social conduct that advances society towards the Constitutional goal of progress. A strong institution of property rights for the copyright system correlates with greater progress of science and arts because the recognition and protection of individual authorial autonomy instills individual and collective social responsibility in how works are used and produced, generates public respect for the act of authorship, and fosters education, research, and economic development through the production and use of literary and artistic works. The creation of diverse works will contribute towards progress of science and arts only if an underlying foundation of property rights protect the creator of a work to instill a sense of individual autonomy and responsible authorship and directs public use of the work toward socially beneficial purposes in ways that strengthen, rather than weaken, the moral fabric of society. This Article concludes that the progress of science and arts is not only dependent on a system of statutory copyright provided by the Copyright Act but on an institution of property laws to provide normative guidance on proper conduct in the production and use of literary and artistic works in ways, which would advance progress.

Ben Barros

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The Internet is a semicommons. Private property in servers and network links coexists with a shared communications platform. This distinctive combination both explains the Internet's enormous success and illustrates some of its recurring problems.

Building on Henry Smith's theory of the semicommons in the medieval open-field system, this essay explains how the dynamic interplay between private and common uses on the Internet enables it to facilitate worldwide sharing and collaboration without collapsing under the strain of misuse. It shows that key technical features of the Internet, such as its layering of protocols and the Web's division into distinct "sites," respond to the characteristic threats of strategic behavior in a semicommons. An extended case study of the Usenet distributed messaging system shows that not all semicommons on the Internet succeed; the continued success of the Internet depends on our ability to create strong online communities that can manage and defend the infrastructure on which they rely. Private and common both have essential roles to play in that task, a lesson recognized in David Post's and Jonathan Zittrain's recent books on the Internet.

Ben Barros

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Legal institutions struggle when the legality of behavior, and the normative acceptability of that behavior, diverge. Sometimes behavior that is formally illegal is normatively acceptable; sometimes behavior that is legal is normatively unacceptable. Want proof? When you drive home today, drive 1 mph under the speed limit. You'll find that behavior that is illegal -- speeding -- is normatively acceptable, but that legal behavior -- driving below the speed limit -- is normatively unacceptable.

Legal institutions facing those divergences falter in predictable ways. Behavior that is legal but normatively unacceptable cannot trigger a formal response from legal institutions, so tends to trigger 'popular justice' responses -- sometimes as mild as tailgaiting, sometimes as severe as violent vigilantism. Behavior that is illegal but normatively acceptable usually does not trigger a formal enforcement response, but it can -- at the enforcer's discretion. The danger here is selective enforcement. Consider again the speeding example: what is racial profiling but selective enforcement against illegal but normatively acceptable driving behavior?

The same dynamic is at work with regard to property rights, as the recent lawsuits brought against Jammie Thomas and Joel Tennenbaum demonstrate. At least among the young and computer-savvy, non-commercial file-sharing seems to be normatively acceptable, even though it is illegal. According to the Electronic Freedom Foundation, one in five American Internet users is a file-sharer. Ask the next class you teach for a show of honest hands, and you'll probably find that estimate accurate.

The predictable danger when there is is such a wide divergence between the legality and normative acceptability of behavior is selective enforcement. Courts aren't good at avoiding being used as vehicles for selective enforcement. In both the Thomas and Tennenbaumcases, Judges Davis and Gertner openly lamented their inability to prevent their institution from being so used. Judge Davis in the Thomas case expressed serious misgivings about the unfairness of singling Thomas out for liability, stating that Thomas "acted like countless other Internet users. Her alleged acts were illegal, but common." Judge Davis recently slashed the damagesawarded against Thomas by 97%, from $1.92M to $54,000. He clearly is intent on fighting back against the perceived unfairness of selective enforcement against illegal but normatively acceptable behavior. But the RIAA isn't giving up, either; they have filed a motion for new trial on damages.

But even the RIAA must realize that it cannot hope to use the courts to selectively enforce against normatively acceptable behavior forever. Usually, eventually, property rights catch up to notions of normative acceptability.

Mark Edwards

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It has been a while since we've blogged here about virtual property. Forbes.com has a story about a 27-year-old graduate student from Australia who paid $26,500 for an island in the virtual world Entropia. It seems like a good deal for him -- he apparently makes over $100,000 per year off of the island.

Thanks to my student Ulysses Wilson for the pointer.

Ben Barros

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One of the things I try to teach students is that the job of "lawyering" often requires knowing the practical limitations of the rules and theories we discuss. For example, it's one thing to know that the law gives certain rights to your client; it's a different thing to understand how enforcing those rights will affect your client's overall interests. In the world of property law, this issue comes up with some frequency. Take land use practice, for instance, where advancing your developer client's legal rights too forcefully may lead to resentment or backlash from the public officials (or their constituents) with whom the client likely needs to maintain good working relations.

Over at Concurring Opinions, Gerard Magliocca (Indiana - Indianapolis) applies this idea to the "Who Dat" controversy that I mentioned here. Noting the public outrage over the NFL's claims to the phrase, he writes that intellectual property rights often "cannot be enforced to their limits because that would alienate potential customers." A recent incident involving Bruce Springsteen seems to bear this out. The Boss apparently has filed a copyright infringement suit against a New York bar that allowed a band to play his songs but never paid ASCAP a licensing fee for the privilege. Whatever the legal merits of the suit, some of the comments to the story suggest that there may be a public relations cost for pursuing it. Because I think it's important for students to realize this tension early in their careers, I like to provide them with these types of real world examples.

Mike Kent

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A controversy is brewing over the ownership of the phrase "Who Dat?", which is chanted by fans of the New Orleans Saints football franchise (shortened from the cheer "Who dat say dey gonna beat dem Saints?"). In light of the Saints' upcoming (and inaugural) appearance in the Super Bowl, some T-shirt makers have been selling shirts that include the phrase. The NFL, claiming trademark ownership of the phrase when used in connection with the Saints, has sent the shirt makers cease-and-desist letters. A competing claim to the phrase has been made by two New Orleans natives who assert that they were the first to use it commercially in 1983, although the phrase apparently has been in existence much longer. The apparent view among most Saints fans is that the phrase simply cannot be owned. The matter is of sufficient importance in Louisiana that Gov. Bobby Jindal has asked the state attorney general to look into the ownership issues, including initiating litigation if necessary.

This article, written for the Eighth Annual Legal Scholarship Symposium celebrating the work of Richard A. Epstein, assesses Epstein’s advocacy of a default rule for patent conveyances. The article first explains how nineteenth-century patent doctrine supports Epstein’s argument for a conveyance default rule, detailing how early courts adopted for patents the same conveyance default rule they applied to real property. In real property, the default rule provides that, barring words of limitation or restrictive covenants, a conveyance transfers the entire estate, i.e. fee simple. Since patents are property rights – early courts often analogized patents to real property – a similar rule was adopted for patent conveyances. This historical case law confirms Epstein’s critique of the recent decision in Quanta Computers v. LG Electronics as unprecedented “formalism,” because the Quanta Court adopted a mandatory rule that all conveyances as such exhaust all property rights in patents. In shifting from a default rule to a mandatory rule, Quanta undermines the rights of patentees to use and dispose of their property.

The article then discusses some potentially costly complications arising from Epstein’s support for rule-of-reason antitrust review of patent conveyances. The virtue of the conveyance default rule, according to Epstein, is that it is a simple matter of administration. These gains in low administration costs, however, may be lost given the inherent complexity in the ex post application of rule-of-reason antitrust standards to innovative commercialization of inventions. The inherent unpredictability and indeterminacy in such contextual assessments threaten the dynamic efficiencies achieved by the patent system. This is especially salient when rule-of-reason standards require unsophisticated courts to predict and to regulate new, innovative commercial practices arising from inventions. This counsels against antitrust review of patent conveyances, even in Epstein’s second-best world of simple rules for complex innovation.

Ben Barros

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